21 Ways to Save Money While Saving the Environment in 2021

There are many easy ways to save money and the environment in our everyday lives. From the laundry room to the mailbox, the grocery store to the backyard, minor lifestyle adjustments can make a big difference. And there’s no better time than now to start. 

In honor of Earth Day 2021, here are 21 tips and ideas for saving money and the environment.

1. Use a Reusable Water Bottle and In-Home Water Filter

If you’re going to make one immediate lifestyle change for Earth Day 2021, commit to ditching single-use water bottles. Currently, Americans purchase about 50 billion bottles of water a year, amounting to around 156 per person. By combining a reusable glass or water bottle with a filtered pitcher or filter attachment for your kitchen sink, you can help reduce plastic waste and save on your grocery bill. 

2. Run the Wash Only When It’s Full

It should come as no surprise that conserving water can save money while protecting the planet. (It’s why so many items on this list are about water!) So hold off on running the dishwasher or washing machine until there’s a full load. In doing so, you’ll save money on your monthly water and energy bills. Want to save even more? Most of your clothes, like delicate items made with lace or silk and dark, colorful fabrics will come out just as clean if you wash them with cold water. Additionally, according to GE, many detergents have enzymes that start to work in temperatures as low as 60 degrees, and cold-water detergent also enhances results. 

3. Use DIY Environmentally Friendly Cleaners

Speaking of dishes and laundry, many detergents are made from synthetic ingredients that are bad for the environment and aquatic life in particular. Thankfully, it’s easy to make your own aromatic household cleaners using products like baking soda, vinegar, herbs and lemon juice. By utilizing things you may already have in your pantry to quickly produce effective cleaners, you will save money and the environment.

4. Install a Programmable Thermostat

Replacing your old thermostat with a programmable model is an easy and affordable way to reduce your heating and cooling bill — one that Energy Star estimates will save you around $180 a year, on average. That’s because a programmable thermostat can be set to vary the temperature in your home depending on the time of day, whether you’re home and so on. Many programmable thermostats can even be operated with an app, meaning you can pre-heat or cool your house before you get home instead of running the HVAC unit all day.

5. Go Meatless on Mondays and More

You might be surprised to learn that the meat industry produces more greenhouse gases than the transportation industry. Making Monday — plus maybe another day or two each week — meatless, is one way we can help the environment exhale and recover from such intense overuse. As a bonus, you’ll save money too, because rice, pasta, beans, potatoes and frozen veggies are all cheaper than meat. 

6. Turn Off the Water

Do you leave the water running when brushing your teeth? Doing so wastes a lot of the Earth’s precious resources and your money too. Conserving water can save money while protecting the planet, so wet those bristles, apply toothpaste and turn off the faucet while you brush for two minutes, twice a day!

7. Stop Using Paper Towels

Instead of buying disposable paper products that hurt the environment, make use of ‘utility towels’ for spills and general cleanup duties. Tossing them in with your laundry is a less expensive and more environmentally friendly way to clean up messes in your home.

8. Eliminate Food Waste

According to a report from the National Resources Defense Council, 40% of food produced in the United States ends up in landfills. Meanwhile, 1 in 8 Americans goes hungry. It’s sad, expensive and an environmental disaster. Wasted food can also be a massive waste of your monthly budget. To avoid wasting food, make weekly menu plans and shopping lists. This will help you to shop smarter at the grocery store, buying only what you need and will consume, and all but eliminate food waste. 

9. Shop Second-Hand

The manufacturing of new clothes, furniture and other products is complicated from a fair wages and environmental impact standpoint. Instead of exclusively shopping for new items, look for second-hand goods at local thrift stores. You can also use sites like Freecycle.org and the NextDoor app to discover who in your neighborhood is giving away or selling their unwanted stuff. 

10. Unplug Your Electronics

Did you know that electricity is still flowing to your devices and appliances even when they’re turned off and not in use? It’s true! By unplugging them when not in use, you can save roughly $165 per year and help reduce carbon dioxide emissions. 

So, unplug the toaster after you’re done making your morning bagel and unplug the TV while you’re at work or asleep at night, just like you do with your vacuum once the floor is clean. It may take a while to get used to unplugging and plugging in your electronics (a power strip can make this an easier, one-plug process), but when it comes to ways to save money and the environment, it doesn’t get much simpler. 

Note: You may have to leave the WiFi router plugged in 24/7 if you have a home security system, front door camera or a programmable thermostat.

11. Reuse and Repurpose Everyday Items

In addition to shopping second-hand, you can find ways to reuse and repurpose items already in the house. For example, glass jars that once held your favorite pickles or mayonnaise can easily become cute storage containers for your child’s marble collection, a handsome tea bag holder displayed on the kitchen counter or decorative jars adorning a shelf. Here are 50 more ways to get organized by repurposing and upcycling things you may already have in your home. 

12. Buy Products That Last

It may cost slightly more at first, but when you buy a new product, choose to spend the extra money to ensure you are buying something that will last a long time. Not only will this decision save you money in the long run, it will also help keep more trash from being added to landfills. 

According to the most recent EPA data available, landfills received 29.2 million tons of durable goods trash in 2018. That means that clothes, bed sheets, diapers, and paper plates and cups accounted for nearly 20% of everything added to landfills! You can make a difference by using reusable products, switching to cloth diapers and choosing higher-quality clothes, sneakers and linens.

13. Collect Rainwater

According to Popular Science, “When an inch of rain falls, more than 1,000 gallons of water runs off the average American roof. That’s enough free H2O to supply the family inside for a few days and maybe knock a few dollars off the monthly utility bill.” 

Additionally, plant parents know that rainwater is pure hydration! It’s soft water containing more oxygen and micro-nutrients that your plants will love. When you collect some of that rainwater, you store those natural resources away for use on your houseplants, lawn, and in your garden during dry spells. Conserving water in this way can save money while protecting the planet and is a great habit to start on Earth Day 2021.

14. Stop Junk Mail

Annually, the production and delivery of junk mail uses more energy than if 2.8 million cars were left idling 24 hours a day, 7 days a week! Additionally, according to the Center for Development of Recycling at San Jose State University, each American receives 41 pounds of junk mail annually. Producing the paper for all that junk results in the chopping down of between 80 million and 100 million trees every year. That’s a huge environmental price to pay to learn about the new Buy One Get One deals at the local shoe store! Stop junk mail from arriving at your door to save the environment and maybe even save some money since you won’t be tempted to buy anything being sold to you.

15. Use Cloth Napkins

Not only will you feel a bit more elegant in your day-to-day life, using cloth napkins is also one of the simplest ways to save money and the environment. Cloth napkins can help fill up your washing machine, too, making sure you have a full load of laundry every time.

16. Insulate Your Doors and Windows

Allowing heat to escape your home in wintertime and not keeping all of the cool air inside during the warmer months is an expensive ecological mistake that can be easily fixed. One of the ways you can help the environment and save money on utility bills is by insulating doors and windows with weatherstripping. Sealing up an older home may help reduce your heating and cooling bills by more than 20% according to the U.S. Department of Energy.

17. Plant Herbs

An ambitious backyard garden project that produces tomatoes, peppers and cucumbers could save you hundreds every year in food costs. But you can also start small. Plant herbs in a window box to give yourself easy access to just the right amount of basil needed for mozzarella and tomato salads, the perfect pinch of rosemary for the perfect roast potatoes or ample cilantro for homemade guacamole. 

Not only is growing your own herbs environmentally friendly, it’s kind to your wallet, too! No longer will you find yourself spending $3 for each bundle of herbs at the grocery store, most of which you will likely end up throwing away within a few days.

18. Switch to LED Bulbs

As your light bulbs go dark, replace them with LED bulbs. While they do cost more than traditional light bulbs, LED bulbs last significantly longer and use up to 80% less electricity. The result is a potential savings of $20 per bulb. Use this energy savings calculator to see the return on investment of switching to LED light bulbs.

19. Shop for ENERGY STAR Appliances

As your old appliances come to the end of their life, shop for ENERGY STAR replacements, as greener purchasing decisions will help save money and the environment. For example, a water-efficient ENERGY STAR washing machine uses 25% less energy and 33% less water than regular washers. Over its lifetime, ENERGY STAR washing machines can save $370 in energy costs, which may ultimately help pay for themselves! 

Whether you’re in the market for a dishwasher, washing machine or water heater, buying an ENERGY STAR-certified appliance could be a smart choice because conserving water can save money while protecting the planet. You may even be eligible for a rebate when you buy ENERGY STAR products like air-conditioners, microwaves and washing machines.

20. Switch to a Bidet Toilet

Bidets are widely used nearly everywhere except in America, although that’s changing thanks to affordable new bidet attachments that are able to be easily added to most existing toilet seats. And it’s easy to see why. Bidet toilets save money and the planet by using only one-eighth of a gallon of water and requiring far less toilet paper to get clean. 

Bidets are proof that conserving water can save money while protecting the planet, because:

  • It takes 37 gallons of water to make a single roll of toilet paper.
  • 384 trees will be cut down to make a one person’s lifetime toilet-paper supply.
  • Americans spend between $40 to $70 a year on toilet paper.

21. Quit Smoking

Not only is smoking an extremely expensive habit, cigarettes pose a threat to the environment because they contain chemicals that contaminate waterways and ground soil, and harm wildlife. Additionally, discarded still-lit cigarettes can cause fires, damaging homes and land. The impact on the Earth is severe, but the real cost of smoking can be expressed through economics. The financial cost to each smoker is estimated to be between $1.6 and $3.1 million over the course of a lifetime, when you consider the out-of-pocket cost of the products plus the significant healthcare expenses caused by smoking. 

Start Saving Money and the Environment Today

These are just 21 of the many simple ways to save money and the environment by making minor lifestyle changes in our everyday lives. As we celebrate Earth Day 2021, think about: 

  • Buying fewer disposable products
  • Maximizing your laundry and dishwasher usage
  • Unplugging your electronics
  • Making your own household cleaners
  • Replacing light bulbs and appliances with more long-lasting, energy efficient models when the time comes

Read more: 11 Financial New Year’s Resolutions

Paying for Childcare and Receiving Childcare Assistance — What to Know

There’s no other way around it, having a child is expensive. It’s a joyous expense but a hefty one all the same. From formula to diapers and the pressure to save for college, you need a sound financial plan and a whole lot of love when you become a parent. And, unless you work from home and can juggle parenting simultaneously, it’s likely that you’ll also need a strategy for paying for childcare.

The Cost of Childcare

Costs vary based on location and your specific economic situation, and the math hasn’t been recalculated for a few years now, but the last time the U.S. government put an estimate on raising a child to age 17, the tally came to a staggering $233,610. It has undoubtedly only gotten more expensive. This means that paying for childcare and other non-college education costs accounts for over $37,000 on average, from birth to their 17th birthday. 

How much is that? Well, The Balance points out the staggering fact that in 33 states as well as the District of Columbia, the cost of infant care is more than the cost of in-state tuition at a public, four-year college!

With an average cost of childcare ranging between $4,000 to $22,600 annually, according to the Economic Policy Institute (EPI), paying for childcare is one of the most significant financial challenges working parents face. But there are programs that help pay for childcare, as well as personal financial strategies that could save you money on childcare costs.

5 Strategies for Paying for Childcare

Whether you’re expecting your first baby, recently became a new parent or have a full family already, you could benefit from a solid financial strategy for paying for childcare. Here are five tips to help you find money to pay for childcare — and to spend less of it while doing so.

1. Evaluate Your Budget

Most financial strategies and goals start with an evaluation of your monthly budget. Take a close look at where your money goes and where you might tighten up. Most people spend unnecessary money every month (too much takeout, unwatched streaming services, bloated cable packages, excessive heat/air-conditioning usage, etc). Those dollars could be better allocated and put to use elsewhere (toward long-term financial goals and childcare costs, for example).

2. Part-Time Childcare

Even if you’re working remotely, you may benefit from receiving childcare assistance. Enrolling your kids into childcare on a part-time basis will help keep your costs down while still affording you the time to get your work done, indulge your individual passions, clean, or simply practice the self-care needed to be a whole and healthy person and parent.

3. In-Home Assistance

Babysitting has been normalized for parents to enjoy a night out, but why not make use of the same dependable neighborhood teenagers and babysitters you have had on speed dial to help you with your childcare during the daytime. You’ll get the on-demand childcare assistance you need for a fraction of the cost of full-time childcare. 

4. Low-Cost Childcare

Paying for childcare at private preschools can give parents sticker shock. Instead, look into the churches, YMCA/YWCA and other non-profit community-based organizations in your town. These local establishments may offer a low-cost childcare option for neighborhood families.

5. Free Pre-K

As parents await the establishment of free universal pre-k, there are some options for giving your child the preschool education and socialization they need. Check out the pre-kindergarten choices in your state to discover your options for receiving free state-sponsored childcare assistance and early preschool education for your kids.

5 Ways to Receive Childcare Assistance

From tax-advantaged savings accounts and tax credits to prominent government programs, here are five ways to receive financial assistance to help pay for childcare. 

1. Dependent Care FSA

If your employer offers a Dependent Care Flexible Spending Account (DCFSA), you can set aside up to $5,000 tax-free to pay for childcare. This includes preschool, summer day camp, before or after school programs, and daycare. Depending on your tax rate, Care.com says that using this kind of FSA to pay for childcare could save you up to $2,000 a year. 

2. The Child and Dependent Tax Credit

Even if your employer doesn’t offer a DCFSA, you may still be able to take advantage of tax benefits. This specific childcare tax credit allows you to itemize up to $3,000 in childcare expenses per child per year, up to a $6,000 annual cap per family.

Care.com goes on to explain that, “Once you’ve itemized the expenses, you can take a percentage of that and apply the tax credit. Most families will see a 20% savings, which means you’ll save up to $600 if you have one child and up to $1,200 if you have two or more children.”

3. Military Childcare Fee Assistance

If you’re a member of the United States military, you may be eligible for Department of Defense childcare fee assistance to help you pay for childcare. The requirements for this program are different for each branch of service, so check to see what your branch of the military offers.

4. Childcare Subsidies

The federal government distributes money to state-run childcare subsidy programs to help low-income families pay for childcare so they can work or go to school. Check the benefits and subsidies available in your state to see how they may help you pay for childcare.

5. Head Start Programs

Head Start and Early Head Start programs exist to provide low-income families free learning and development services for children ages birth to five. If you have a child with disabilities, Head Start could be a good option for helping to prepare them to succeed in school and in life, and helping you get the childcare assistance your family needs.

Read more: 6 Lessons for Teaching Financial Literacy to Your Child

Disclaimer: None of the information provided in this email or blogs is intended to be tax advice. Please consult an attorney or tax advisor.

Saving vs. Investing: What’s the Difference?

Commonly confused, both as words and concepts, saving and investing are not the same. There are similarities between the two, but let’s look closely at saving vs. investing to learn how each approach to putting money aside can help you today and in the future.

What Is Saving?

Saving is a term used for safely putting money away for short-term goals. Typically, you will not want to put your savings at risk of losing any of its value. This is because growth is not what you’re after when trying to save. Instead, you want to keep this money relatively safe, accessible and ready to use in a moment’s notice.

Some examples of savings, include:

  • Bank savings accounts
  • Money Markets
  • Certificates of deposit (CD)
  • Emergency funds
  • Christmas shopping accounts
  • Piggy banks

Having savings on hand is important, but there are questions to ask yourself before you start saving:

1. Do I have outstanding debt?

If you have credit card balances or outstanding medical bills, you should consider paying off this debt before saving money, because consumer debt often carries a rate of interest higher than that of a savings account. It would be counterproductive to save money and earn 1% interest while paying upward of 20% interest on outstanding credit card balances. Pay those off, then make a plan to save. If you can’t pay off your debt, you might consider debt consolidation. With a personal loan, for example, you can often secure a lower rate than a credit card, and you have a clear path to paying off your debt since the loan is for a fixed term — usually 3 or 5 years.

2. Can I afford to save?

Some financial experts would phrase this question as, “Can you afford NOT to save?” but the truth is that your monthly budget, expenses and income may not facilitate savings right now. Thinking critically about your spending and how to budget better could help you find additional dollars to pay down debt and then start saving.

Deciding to focus on saving goals and building an emergency fund during these uncertain times is one of the best financial new year’s resolutions to make and to stick to all year long. 

The Difference Between Saving vs. Investing

Unlike saving, investing is for longer-term goals. As a result, where the money you choose to invest goes will likely be different than where you save. This is because only money that’s not needed for years (maybe even decades) should be invested. Therefore, because it needn’t be liquid or easily accessible, money you are investing can be put into riskier vehicles than money you are saving for short-term needs and goals. 

Some common examples of investing, include:

  • Retirement plans
  • Stock portfolios
  • Real estate
  • Cryptocurrency

Being able to invest for your future is crucial to your long-term financial stability and achieving retirement goals, but there are also questions to ask yourself before you start investing:

1. Do I have adequate savings for emergencies?

Experts suggest couples with two incomes and secure jobs have savings equal to three months of expenses, whereas if one of your jobs is less than secure, it could be wise to accumulate six months of expenses in a savings account. Finally, individuals or families relying on a single income could benefit from having a full year of expenses saved for a rainy day. Whatever your current employment situation, you should consider starting/adding to a savings account before investing.

2. Am I taking full advantage of my retirement savings?

While the word ‘savings’ is commonly used when talking about putting money away for retirement, contributing to a company’s retirement plan or an IRA is actually investing because of the timetable for using these dollars and the relative inaccessibility of the money while still employed and under a certain age. For many people, the first investing they will do is through their company’s 401(k). This is because it may be tax advantageous to do so (you contribute pre-tax dollars from your paycheck, which reduces your taxable income), is a painless process (the money comes out of your paycheck automatically), and often there’s a company match, which can help accelerate your retirement savings. 

3. When will I need the money I will be investing?

Another question to ask yourself to better understand when to save and invest is, “When will I need to use this money?” If you think you may need to use the money you will be investing within the next five years, that cash should be saved and not invested. Because of market volatility, money that’s invested should remain invested for a number of years. Not giving your investments enough time to grow could cause you to realize losses that otherwise would only be “on paper.” 

4. What is my risk tolerance?

Investing usually involves putting money at risk in order to, hopefully, experience exponential growth over many years. If you’re not comfortable with the risks associated with investing, such as the aforementioned paper losses — when your account balance drops below your initial investment, you’re experiencing a loss but it’s not realized unless it is sold, meaning it could recover and turn into a gain — investing may not be for you regardless of how long you have before needing to access the money.

Investing options today are robust and can extend far beyond the stock and bond mutual funds available in your company 401(k) plan, the investment you’ve made in buying your home, and even trading individual stocks in a brokerage account. Learn how you can diversify your investment portfolio with Prosper.

Get Started

Now that you understand the differences between saving vs. investing, get started on building your emergency savings fund and look into your retirement plan options to ensure you have a financially sound future.

Read more: Tips for Saving, Investing and Managing Your Money at any Age

13 Ways to Save Money on a Tight Budget

If you’re one of the many Americans living paycheck to paycheck since COVID-19 struck, you likely haven’t thought much about saving for the future over the past 12 months. And you may be wondering how to live on a budget and save money at the same time. Believe it or not, there are many ways to save money on a tight budget without impacting your ability to pay your bills or put food on the table. 

Every donut lover knows the value of a baker’s dozen, so grab a cup of coffee (brewed at home to save money, of course) and sit down to discover 13 deliciously simple ways to save money on a small income.

1. Save First, Spend Second

As you make, revisit and revise your monthly budget (and yes, you should have a monthly budget — here’s how to budget and save money on a small income), first put down the amount you want to save each month. Do this before listing your rent or mortgage, before the car payment and streaming services, and even before the amount you plan to spend on groceries. This way, instead of saving only if there’s money left at the end of the month, you’re making saving a priority. By adjusting your spending accordingly, you’ll be more likely to actually save money each and every month. 

2. Make Your Coffee and Tea at Home

A box of high-quality green or English breakfast tea costs about $6 for 50 bags. That’s 50 cups of tea for the equivalent of just two from a coffee shop! Making your own coffee and tea at home could easily save you hundreds of dollars each month — that’s money that can be saved! Getting into the habit of making your hot morning beverages at home instead of paying for them through the drive-thru is one of the first ways you can save money on a budget.

3. Take the Pantry Challenge

At least one day each week, go without spending any money on food or beverages by using only what’s already in your pantry (and freezer/fridge) to prepare breakfast, lunch, dinner, snacks and dessert for you and your loved ones. Not only will this challenge free up money to be saved instead of spent, it will help you become resourceful and self-sufficient in the kitchen, and potentially eliminate food waste, all of which could have positive long-term impacts on your budget. 

4. Round-up Savings

One of the clever technological tricks to saving money without realizing it or feeling its impact in your checking account is to take advantage of round-up savings. Often called microsaving, your purchases are rounded-up to the nearest whole dollar and, whether through a third-party savings app (note: beware of monthly fees for these services) or through your own bank, like Bank of America’s Keep the Change Savings Program, watch as that spare change is deposited directly into a savings account. Rounding up is one of the simplest ways to save money on a tight budget. 

5. Lose Your Loyalty

Being brand loyal can cost you extra money at the grocery store. Instead of paying top dollar for your favorite brands each week, only buy them when they’re on sale. During non-sale weeks, buy what is discounted. You’ll save money and may just find new favorites in the process!

6. Adjust the Temperature

Small tweaks to your home’s temperature can dramatically reduce your utility bill. According to the U.S. Department of Energy, you can save as much as 10 percent per year on heating and cooling by simply turning your thermostat back 7 to 10° for eight hours a day from its normal setting. So put on a sweater and your favorite fuzzy socks, and invest in a programmable thermostat, because this is how to live on a budget and save money every month!

7. Make the Movie/Game an At-Home Event

If you have a sizable flatscreen TV at home, it’s likely that watching a new movie, concert or your favorite team’s game from the comfort of home will actually be more enjoyable than lining up to get into a theater, stadium or arena (once we’re able to do so again). One thing’s for sure, it’ll certainly be cheaper! You’ll pay no parking fees, buy no overpriced drinks and food, and of course, no expensive tickets are required. Pop some popcorn, prepare a cheese and cracker board, and put out a hummus and veggies platter, because enjoying movies, concert streams and sporting events at home is one of the easiest ways to save money on a tight budget.

8. Choose Filtered Over Bottled Water

Not only will this decision help save the environment, it’ll also save you money. A simple pitcher with replaceable filters and a reusable bottle will go a long way toward keeping your beverage costs down from month to month. Additionally, consider drinking more water and less soda to become healthier physically and financially!

9. Get Thrifty

Local thrift stores are overflowing with barely used jeans, cute sweaters, comfy shorts, gently worn sneakers, like-new accessories and so much more. Starting to buy some of your own, but especially your still-growing kids’, clothes and shoes secondhand for 25–50% of the cost of purchasing them new is sound advice for budgeting on a low income.

10. Make Saving a Weekly Challenge

PNC Bank suggests that if you’re looking for ways to save money on a tight budget, make saving a challenge by slowly increasing (or decreasing) the amount you put away each week. For example, put $1 in savings during the first week of January. The second week, make it $2, and so on. Doing this for 52 weeks straight will result in a whopping $1,378 saved! Or, if you want to start strong, reverse the challenge by putting $52 into savings the first week of the year, followed by $51, $50, $49 etc. This method will free up money at the end of the year when you’ll likely be doing some holiday shopping.

11. Use Cashback Apps

When you’re trying to figure out how to live on a budget and save money at the same time, you should check to see if stores participate with a cashback app or service, like Rakuten, before buying anything online. It may only be 1% or 2% back on your $25 purchase (although depending on the store and the day, it could be upward of 10–15%) but just like putting nickels, dimes and quarters into a piggy bank, your cashback savings will grow steadily. Every three months, when you get a check (or Paypal), that could be a substantial amount of money to put away into your savings account. 

12. Consider Your Streams

Once upon a time, consumers wished they could pay for an a la carte cable TV package to save money and only have the channels they wanted to watch. That day arrived, sort of, but chances are you’re paying more to watch TV than ever before. This is because most people now pay for four streaming services each month, with 38% of Americans using five or more according to a Los Angeles Times report. And all that could be in addition to a cable package so many wanted to be rid of in the first place! 

The result is likely a personal budget straining to cope with the costs of television in 2021, and a lack of money being saved. One of the ways to learn how to live on a budget and save money is to consider your streams. Really think about what you actually watch and which streaming services can be canceled or at least paused while you build up an emergency savings fund, which could have been one of your financial New Year’s resolutions.

13. Save Your Tax Refund

Finally, if you’re getting a tax refund this year, make a plan to put it directly into savings. Even if you’ll need to use some of it to pay down debt or buy a new car, make sure it goes into savings first. This is because simply seeing that account balance rise, and feeling the emotional satisfaction of having money saved, may just be the impetus for a continued commitment to making saving money a part of your everyday life.

Read more: Simple Tips for Saving Money on Your Energy Bill

The 9 Best Ways to Use Your Stimulus Check

Now that the $1.9 trillion American Rescue Plan has been signed, money from the third round of COVID-19 stimulus checks is arriving in millions of bank accounts. In this post we’ll look at how you might consider using your stimulus check. But first, let’s answer the one question you may be asking about the new economic relief package.

Do You Have to Pay Back the Stimulus Check?

As with the previous two rounds of COVID-19 stimulus checks, you do not have to pay back this money. These funds are not a loan or an advance on future tax refunds. This is stimulus money to help you with your financial needs and hopefully invigorate the economy. Additionally, this new stimulus check is not taxable, so there will be no unpleasant surprises caused by these funds when you file your taxes in 2022. Of course, it’s always best to consult with a tax professional about the impact of the economic stimulus checks on your specific tax situation.

The 9 Best Ways to Use the New Stimulus Check

If used wisely, money from the latest economic stimulus might help you accomplish a number of goals, both immediate and longer term. This is especially true if you’re no longer in dire straits by the time the new COVID-19 stimulus check arrives in your checking account.

With this extra money, up to $1,400 for individuals based on income levels from your most recent tax filing, you might add to or start a savings account and take care of yourself and loved ones who have been through a difficult 12 months. You could also consider using some of your stimulus check to pay down debt, shop at local small businesses and make a positive impact on your community’s most vulnerable residents. If managed correctly, you could accomplish all of the above and more with your COVID-19 stimulus money.

1. Use Your Stimulus to Stay Afloat

It’s possible that you’re still behind on important bills because of the pandemic that prompted this third round of economic stimulus checks. Maybe rent is overdue or a utility bill needs to be paid. There’s no shame in this — the past 12 months have challenged nearly everyone in one way or another — but you will now have up to $1,400 to square what you owe and plan for the future.

2. Pay Off Debt with Your COVID-19 Stimulus Checks

If you have an outstanding balance on a credit card charging you a high rate of interest, a payday loan or other bills weighing you down month to month, using your stimulus money to pay them down could be the best use of your portion of the American Rescue Plan. 

Pay down the balance of your highest interest debt first. If you can pay it off in full, that’s even better. But if not, consider a debt consolidation loan at a lower interest rate. Once paid off, consider closing your high-interest credit card in favor of one with a more favorable interest rate and no annual fee.

3. Put Your Stimulus Check Toward Creating an Emergency Fund

Most Americans were taught a valuable financial lesson in 2020: It’s crucial to have money set aside in an emergency fund. A ‘rainy day’ savings account can help you and your family in the event of unexpected financial struggles, a job change or, as we’ve seen, a global pandemic. As you decide how to use your stimulus check, be mindful that the longer you wait to transfer the money from your checking account to your savings, the more likely you are to dip into it.

4. Take Care of Your Mental Health

If you’ve been needing or wanting to try therapy but couldn’t afford it because therapy is not covered by your health insurance, put your stimulus to work to improve your mental health. You can schedule an appointment with a therapist in person or schedule a virtual service to stay socially distant while seeking the help you deserve. 

5. Schedule Your Overdue Car Repairs

If you’ve been ignoring that pesky check engine light, putting off overdue oil changes or delaying other critical automotive work, think about using a portion of your stimulus money on repairing your ride. Scheduling the repairs your car has needed during the pandemic might end up saving you a lot of money down the road.

6. Put Your Stimulus Check to Work in Your Community

Understandably, philanthropy and charitable giving has dipped as Americans who would usually be generous with their disposable income have found themselves struggling to make ends meet and suffering through furloughs. With this new batch of COVID-19 stimulus checks, you may be in a better position to make a big difference.

There’s probably a cause or two near and dear to your heart, maybe even near you in your local area. And chances are, they could use some support right now. So, whether that’s buying canned goods for a local food bank or donating cash to the animal shelter you once adopted your pet from, using a bit of your stimulus check to do good will make you feel better today and may just help you during next tax season too (because most charitable giving is tax deductible).

7. Invest in Yourself

Thinking long term, one of the smartest ways to use a stimulus check could be investing in yourself through a degree program or going to school to gain a new skill. Additionally, making this investment in your future may have future tax benefits, too, through the Lifetime Learning Credit. 

According to the IRS, “the Lifetime Learning Credit can help pay for undergraduate, graduate and professional degree courses — including courses to acquire or improve job skills.” This credit is worth up to $2,000 per tax return and there’s no limit on the number of years you can claim it.

8. Start a Business

As you’ve been home during COVID, did you start a new hobby or find yourself crafting to pass the time? Maybe those new passions could become a viable side hustle or even full-time job now. Not only did 2020 see the largest increase in new business applications in 13 years; it also saw a 61.7% increase in the number of Etsy sellers from the year prior. 

Your COVID-19 stimulus could be the seed money you require to launch a business on Etsy or invest in equipment to record a podcast, monetize it and take it to the next level.

9. Treat Yourself with Your Economic Stimulus Money

Buying that beautiful new watch or having lunch in the independent restaurant that pivoted to curbside pickup to stay in business during the past year may seem frivolous but doing so will actually accomplish two crucial things. 

First, self-care is important. You may feel lighter and happier, and after what we’ve all been through, that’s a valid desire. 

Second, you will be putting stimulus money into the local economy, which will help businesses, keep people employed and maybe someday soon encourage hiring, and give America the boost lawmakers are hoping for with the new round of economic stimulus checks. 

Read more: 11 Ideas for What to Do with Your Tax Refund this Year

How to Save for Retirement at Any Age

When you talk to people about how to save for retirement, you’ll likely hear one of three things… I’m too young to worry about retirement. I’m too old to start. I’m already saving.

Aside from the final reply (well done!), such thoughts are incorrect but sadly all too common. People just starting on their employment journey, with an employee’s 401(k) plan and company match available to them, often don’t consider their financial situation in 30–40 years time. When you’re young, though, your money has more time to grow, making those years the very best to save! Meanwhile, older folks who have not been saving or not saving enough for retirement tend to believe that they’ve missed their opportunity to build a nest egg. 

The truth is that it’s never too early to start saving for your retirement and never too late to catch up and secure your financial future.

Important Facts About Retirement Income

  • Americans are living longer than ever before. While good news, this likely means you’ll need to have more saved to generate enough retirement income, and for a longer period of time, than you may currently imagine in order to maintain your quality of life once you stop working. 
  • While once a reliable source of retirement income, Social Security benefits alone will probably not be enough to ensure a comfortable retirement. For this, you’ll need a supplemental source of income.
  • You shouldn’t count on Medicare to fully cover the costs of assisted living or a nursing home, should you need those services later in life.
  • According to 2020 research by Investopedia, almost half of all Americans have no retirement savings whatsoever. This means that, sadly, half of the population may never be able to stop working. 

These facts make it imperative you know how to save for retirement and start saving as soon as possible, no matter your age, so that you can enjoy your later years.

Types of Retirement Accounts

Before we talk about how to save for retirement, let’s take a look at the two most commons types of accounts with which you can put money aside now to let grow. 

Employer-Sponsored Plans

The two most common employer-sponsored plans are 401(k) and 403(b). The former is offered through for-profit companies while the latter is associated with universities, hospitals and other non-profits. With each, employees have the opportunity to save a percentage of their pre-tax paycheck, which not only grows tax deferred via contributing to a 401(k) or 403(b) pre-tax, but also reduces your taxable income. This means that while you may see a $25 contribution deposited into your 401(k) on payday, for example, less than $25 will be ‘missing’ from your take-home pay because you’ve paid less in taxes. 

Many employers offer a matching contribution (or matching up to a certain percentage) to encourage participation in their retirement plan and help accelerate savings growth. Most people should not only be enrolled in their company’s 401(k) but take full advantage of any available match. And the earlier you start, the more money you’ll have saved for retirement.

In 2021, the maximum amount you can contribute to your 401(k) plan in dollar terms is $19,500. But don’t let this figure scare you away from starting. Any portion of your paycheck that you can direct to your retirement will benefit you later in life. 

According to a 2020 TDAmeritrade Report, company 401(k) plans are the preferred investment vehicle for workers between the ages of 40 and 60. 

*There are also solo 401(k) plans available to self-employed individuals. These plans are designed to help business owners save both as the employee and employer.

Individual Retirement Accounts (IRAs)

IRAs are tax-advantaged accounts that you open on your own, not through an employer. Typically, you’ll save money for retirement in an IRA through investment firms (the money invested in a combination of stocks, bonds and mutual funds of your choosing) or a bank (the money saved in a certificate of deposit or similar interest-bearing bank product).  

There are two main types of IRAs: traditional and Roth. The biggest difference between the two is when you pay taxes.

With traditional IRAs, the amount you contribute is tax deductible. Only when you start withdrawing money during retirement is the original money plus any earnings taxed as ordinary income.

The opposite is true with Roth IRAs. Your money is contributed ‘after tax,’ meaning there’s no tax deduction or tax benefit today. But, qualified withdrawals of the original money you contributed plus any earnings are tax-free when withdrawn after age 59½ and when it’s been at least five years since you first contributed to the Roth. Additionally, you always have access to your original Roth IRA contributions, with withdraws available for any reason, and at any time, with no taxes or penalties.

For the 2021 tax year, you’re able to contribute up to $6,000 to an IRA if age 49 or under — slightly more if you’re over the age of 50. Read on to discover this benefit of saving for retirement later in life.

How to Save for Retirement at Any Age

The best way to learn how to save for retirement is to start now, regardless of your age. Through a company’s 401(k) or 403(b)(7) plan, you can begin with just one or two percent of your pre-tax salary and set an automatic increase every year. Although, if you’re able, you should contribute enough to get the full employer match (if offered) right away.

The Benefits of Starting Young

Compounding interest and earnings — the concept of your earnings generating additional money, and those new earnings generating even more, and so on — make the first dollars saved possibly the most profitable because that money has longer to grow and multiply. These early retirement contributions will likely have the biggest impact on your ability to comfortably retire. 

To put this in real terms, a 25-year-old who invests $75 per month could accumulate upward of $113,000 more in retirement savings by age 65 than if he or she started investing $100 per month at age 35 — despite investing less each period, according to Merrill Edge. That’s the power of starting early and watching those dollars compound over those extra years. And this growth on top of growth can help you hit your retirement savings goals more easily.

Here’s how much Fidelity Investments says you should have saved for retirement at every age, in order to maintain your current quality of life into your retirement years:

  • By age 30: The equivalent of your annual salary (For example, if you make $55,000 a year, you should have $55,000 saved by your 30th birthday.)
  • By age 40: Three times your income
  • By age 50: Six times your income
  • By age 60: Eight times your income
  • By age 67: 10 times your income

Despite this, 28% of people in their 60s have less than $50,000 saved for retirement, meaning over a quarter of older Americans likely won’t get to slow down and enjoy what should be their retirement years. 

The Benefits of Saving Later In Life

Current laws governing employer-sponsored retirement plans allow you to contribute an extra $6,500 each year to your 401(k) or 403(b) plan if you’re age 50 or older. With these catch-up contributions, the individual limit increases to a maximum of $26,000. If you can afford it, taking advantage of these higher limits will allow you to boost your savings.

Those age 50 and older are also permitted to contribute extra money to IRAs each year, with the limit increasing to $7,000 for 2020 and 2021. You’re also able to contribute to an IRA for the previous tax year up until the current year’s tax filing deadline date to get another deduction before filing, if needed. Keep in mind that for specific questions or concerns about filing taxes and available deductions, it’s best to consult a trusted tax professional.

No matter when you begin your retirement savings journey, it’s critical that you do so. Maybe you can consider adding another new year’s resolution to start (or start saving more) for your retirement. Making the accumulation of tax-deferred or tax-advantaged money for retirement a priority throughout your life will help ensure you’re able to enjoy your later years and that you’ll be taken care.

Read more: Retirement Planning During an Uncertain Economy